Journal Entry for Prepaid Expenses
Prepaid expenses are those expenses which are paid in advance for a benefit yet to be received. It acts as an asset and considers the rules “debit the increase in asset” and “credit the decrease in expenses” (modern approach).
The journal entry for prepaid expenses involves two accounts: Prepaid Expense A/C and Expense A/C
|Prepaid Expense A/C||Debit|
|To Expense A/C||Credit|
Let’s assume that a currency value of 10,000 is paid advance in March for rent which is due in the following month, i.e. April. The journal entry to record this in the month of March will be as follows;
|Prepaid Rent A/C||10,000|
|To Rent A/C||10,000|